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The Economist's pricing: The art of using free in your pricing

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May 9, 2012

Pricing is an intricate decision indeed. Purchasing behavior of customers are largely affected by the price when a customer expose to a product. Although, economic theory adequately put that, price and demand has an inverse relation and higher price induces lower demand but in the field things have been blurred too much due to groundbreaking changes and now, then and often higher price induces higher demand, but one has to be strategic and a bit more calculative.

The idea of free has a profound impact on our way of buying anything. We really cannot help ourselves at the face of something free. Sometimes, even if the things are not necessary at all and there is sure possibility of not using that particular product in life time, we don’t leave. We love owning things. It can be best understood if you put the example of downloading free e-books. I know my friends who even download science books, if they get it for free, although they all are business students!

Interestingly, most free pricing strategy does not work. Free does not sell well when you use it poorly. Because along with an irresistible allure for free we have also a skeptic mind towards anything that is given for free. If the item is a necessary and important then our doubt goes higher and higher.

In Recent time, most companies are offering free things with their products. If you buy a Lux you will get a soap case for free, if you buy a teabag, you will get a tea pot for free. So these are what happening. However, the underlying reason why free pricing does not work is not that we sometimes dislike free things rather inverse is true. Most of time the free offer does not have much impact on our buying decision because of the way of presentation. Presentation matter, we know.

Following pricing strategy of Economist magazine can teach you better on how to use free in your pricing strategy:

See in above advertisement of The Economist; the first option says that, with a cost of $59.00 you can have an online subscription for one year where you will be privileged to access to all articles from the Economist since 1990.

Then come to second option: it says just get a print subscription for one year after paying $125.00.

Then comes the third option of prices which is most important here to understand the purpose of this article. It says, you just pay $125.00 and get an one year online subscription (the first option) and an one year print subscription. At the beginning you can think either Economist people are some big headed dumb or you can think yourself lucky after taking third option that you have chosen best one. But if you look at the price with a more authentic attention you will see the price is purposely settled to make you to buy 3rd option that $125.00 and first option $59.00 is a free offer!

In above mentioned Economist prices most people end up buying 3rd option which was the target of pricing strategy because you cannot help. This is a best way to use free without making it free and reducing value of free item. Think how can you use this strategy to your product. Don’t make anything free but make it decisively free!


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Ruhul Kader is a technology and business analyst based in Dhaka, Bangladesh. He is also the co-founder and CEO of Future Startup and author of Rethinking Failure: A short guide to living an entrepreneurial life. He writes about internet business, strategy, technology, technology policy, and society. He can be reached at ruhul@futurestartup.com

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3 comments on “The Economist's pricing: The art of using free in your pricing”

  1. " This is a best way to use free without making it free and reducing value of free item.".I liked this strategy.

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